Friday, October 21, 2011

Respectful Disagreements on Smith's use of the IH Metaphor

Nicholas Phillipson, who wrote the justly praised, “Adam Smith: an enlightened life’ (Yale University Press, 2010), writes in The Guardian (UK)HERE

“Governments are the custodians of Adam Smith's invisible hand”

History thinks of Adam Smith as the economist who thought that whenever a person is able to work in his own way, an invisible hand will ensure that he is quite unintentionally working for the benefit of society at large. "Nor is it always the worse for the society that it was no part of it," Smith commented. "By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

This is voice of a philosopher who thought that the interests of merchants would never be the same as that of the public, and who had no faith whatever in the ability of governments to increase national prosperity by rigging the market. It is the voice of someone who thought that the bedrock of economic life and national prosperity in a commercial economy were workers, productive landowners and small businessmen living and trading in local markets they knew and understood. It is the Smith who thought that all that governments needed to do to promote economic growth was to provide security, easy taxes and open markets "all the rest being brought about by the natural course of things".

… “Whatever his private religious beliefs – and Smith was deeply circumspect on such matters – Smith shared his friend David Hume's view that neither philosophy nor science had provided the slightest reason for believing in the existence of a benevolent deity. What is more, Smith was scrupulous in ensuring that at no point had his philosophy been built on Christian or even, as some have claimed, Stoic, assumptions.

… In fact Smith's invisible hand reached much deeper into the fabric of society than the economy. In Smith's wider philosophy, it is an unspoken metaphor for opening up the history of a species that has had to learn to co-operate and exchange its members' goods, services and sentiments if it is to survive, a species whose members have tried to make their lives more "convenient" whenever they have felt secure enough to do so….

… As Smith told it, it is the story of the making of a sociably self-interested species composed of beings who have quite unintentionally acquired their sense of identity, their understanding of sociability in the struggle for survival and contentment. It is a species that owes its humanity to the invisible hand.”

CommentI reviewed Nicholas Phillipson’s book when it was published and thoroughly recommended it on Lost Legacy. It gives a deep thinker’s assessment of Adam Smith’s life in the form of an intellectual biography by a scholar, who is thoroughly immersed in Smith’s moral philosophy and his biography.

Nicholas is a moral philosopher, not an economist – his pages on Smith’s political economy are very brief. This explains, perhaps, why he has bought into the modern invention of the myth (also spread by historians of economic thought, hence what follows is my distinctly minority view) of the use by Smith of the metaphor of ‘an invisible hand’ in Nicholas’s Guardian piece. However, I know Nicholas is familiar with Smith’s teaching on the role of metaphors in English grammar, in that Smith taught that they describe “in a more striking and interesting manner” their objects and do not have an existence beyond their objects. We know this because that is how Smith described the role of metaphors in his “Lectures on Rhetoric and Belles Lettres” [1763] 1963, p 29).

We know that Nicolas is familiar with Smith’s Rhetoric lectures; the book opens with a quotation from Lecture 22 (17 January 1763) on page 1, and refers to the lectures throughout the volume. (Nicholas also refers to Professor Hugh Blair’s follow-on Rhetoric lectures and notes Blair’s acknowledgement of Smith lending to him his Rhetoric Lecture manuscript (Nicholas, p 90), and cites Blair’s own Lectures on Rhetoric and Belles Lettres, 3 vols. 1818, Edinburgh. Blair’s own definition of a ‘metaphor’ is exactly the same as Smith’s, and, incidentally, the same as the definition in the Oxford English Dictionary, 1986. I raise this detail because Nicholas explains the IH metaphor this way:

“It was a response to circumstances with beneficial if unintended consequences for the progress of civilization, behaviour which Smith in one of his more poetical moments would attribute to the workings on the invisible hand’ (p 117)”.

Note how the IH metaphor is promoted by Nicholas from ‘an’ to ‘the’ invisible hand, giving it a definite noun-like and less of a metaphoric quality. Metaphors do not exist separate from the ‘striking and more interesting manner’ by which they describe their object. Similarly with other metaphors Smith used in WN (“Great Wheel of Ciculation’; the ‘Daedalian wings of paper money’; ’a waggon-way through the air”, etc.).

In TMS the IH metaphor refers to the unintentional ‘unfeeling landlords’ being ‘led’ by ‘an invisible hand’ to feed their slaves, retainers, and serfs by absolute necessity – ‘no food, no work is possible’. In Wealth Of Nations the IH metaphor refers to some, but not all, merchants being ‘led by an invisible hand’ to invest ‘domestically rather than abroad by their felt insecurity of investing abroad in foreign countries. Incidentally, a similar insecurity of all domestick merchants led them (also by an invisible hand?) to favour protection, tariffs, and prohibitions against foreign competition, which was contrary to the interests of their consumers, that is not always ‘beneficial’.

Further, the usual quotation is provided in evidence: ‘By providing his own interest he frequently promotes …’etc., while the preceding 8 paragraphs (WN IV.ii.1-9, 452-6) detailing the limited object for the IH metaphor is, as usual, ignored. In fact, Smith’s point was not a general one that ‘an invisible hand’ existed, but a particular point that the insecure ‘domestick merchant’s’ actions add to the annual “revenue and employment of people in his own country”; in short, their insecurity leads them unintentionally to cause a quantitative consequence, because arithmetically the whole is the sum of its parts, which consequence Smith regarded as a public good or benefit.

I am in full agreement with Nicholas that Smith had strong reservations about the role of a “benevolent deity” which I have stated in my paper in the September, 2011 issue of the Journal of the History of Economic Thought (JHET, vol. 33, no 3), ‘The Hidden Adam Smith in his Alleged Theology’

I am not sure what Nicholas means by:

“In fact Smith's invisible hand reached much deeper into the fabric of society than the economy. In Smith's wider philosophy, it is an unspoken metaphor”.

Such a general use of the IH metaphor is certainly “unspoken’ and as such it is without content. Metaphors in a text are the author’s choice to use or not and not a reader’s choice to generalise to mean whatever a reader wants them to mean. This fits the modern economists (and modern philosopher’s too) obsession with the IH metaphor to mean a whole range of ideas, concepts, paradigms and theories, not justified by Adam Smith’s use of it.

Of course, modern authors may make the IH metaphor mean whatever they want it to mean, but it is questionable if they can attribute their meanings willy-nilly to Adam Smith who died in 1790, as if he agreed with their modern meanings. This behaviour gives an undue mythical authority and legitimacy to the various fanciful meanings which modern economists, largely in the 20th century, and for purposes alien to Smith’s political economy and his moral philosophy, have given to his limited use to describe in a “more striking and interesting manner” their specific and clearly stated objects.

None of my objections to these aspects of Nicholas Phillipson’s Guardian article, detract from the high quality of his “Adam Smith: an enlightened life” (Yale UP, 2010). I recommend that you read his book and learn much about Adam Smith’s intellectual biography. Just ignore his references to the meaning of Smith’s use of ‘an invisible hand’ (he mentions it only once).